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Taxing times for the Soft Drinks Industry

Posted

on Friday July 1, 2016

Good, bad, natural or added. There’s been little coating on recent statistics, and the government’s plans to introduce the sugar tax really is the icing on the cake. This could have detrimental effects to brands across the FMCG industry, particularly the soft drinks category. From fizzy, to diet, energy fuelled to sports focused, they are all coming under the spotlight. Consequently, people are increasingly aware of what’s really in the products they buy, eat and drink.

There’s more soft drinks choices than ever, albeit not always the ones we want. Healthier alternatives have increasingly taken prime shelf space with examples such as Savse Smoothies “NO B.U.L.L” campaign launching as a consequence of their accelerated success. For many, they feel there’s not enough of these options on the market, but for some, sugar is still the selling point. That said, the energy market has to date remained buoyant amongst a sea of emerging brands having a 1.3% increase across the convenience channel in 2015. Despite not seeing the same incline, sales have remained consistent, proving the demand is still there.

Of course volumes and margins differ between products, bulk buying and high mark ups direct strategies for the likes of Monster Energy and Lucozade. With litre unit charges estimated to increase by 18p to 24p it hardly seems as if the industry is going to come to a standstill. Whether brands react by increasing margins or simply upping cost price, in the grand scheme of things these increases have questionable impact.

Take the US for example. Sales of soda have declined considerably over the past decade contributing to a significant change in the American diet. Regardless of the differing opinions across states, the lack of tax has clearly not affected the consumer shift. Instead, availability and education have proved successful in aiding this change. Of course, demographics and cultures differ and this same approach in the UK could be seen as halfhearted. So is taxing the best option for tackling the issue head on?

Well I’m unsure if the effects will be dramatic as hoped. After all 18p is easily accounted for in the mark up of products. Brand value and association is also essential, for the likes of the own brand energy drink, they could well suffer, but for the Red Bull lovers and dedicated Relentless drinkers a significant shift in consumption seems unlikely. Sugar after all is widely acknowledged as a main ingredient within their products and their performance enhancer USP, “giving you wings” and “no half measures”.

The tax itself may have little effect in deterring consumers, however the association between tax and sugar is educational in itself. If anything it’s highlighting that as a nation we consume too much, causing us to question our buying decisions. We’re already aware of the impacts. Soaring sales of products such as Savse only highlight this. We’re willing to change our habits, the tax is a way of reminding us of this.